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Gold heads down towards multi-month lows on a stronger dollar

SPDR holdings decline to their weakest since August, with speculators raising net longs in gold in the week to July 3

10 July 2018 - 13:11
Eric Onstad

Gold. Picture: REUTERS

London — Gold headed lower on Tuesday, weighed down by a stronger dollar, and may re-test a seven-month low after a failed attempt to break higher in the previous session.

Spot gold was down 0.3% at $1,253.60 an ounce by 10.30am GMT, after retreating from its highest since June 26 at $1,265.87 in the previous session. US gold futures for August delivery were 0.4% lower at $1,254 an ounce.

"If this dollar strength continues, we could see another test of $1,240, the lows from last week and mid-December, a crucial technical level," said Carsten Fritsch, commodity analyst at Commerzbank in Frankfurt.

Bullion has been in a downtrend since touching $1,365.23 on April 11, the strongest in nearly three months. The dollar’s index against a basket of six major currencies was up 0.2% at 94.263 after dropping to its lowest since mid-June on Monday. A stronger dollar makes greenback-denominated gold more expensive for holders of other currencies.

Investors were also on the sidelines awaiting developments on the trade war between China and the US, said Dick Poon, GM Heraeus Metals Hong Kong. Last week, the world’s top two economies slapped tit-for-tat duties on $34bn worth of each other’s imports.

"Geopolitical issues, such as Britain’s confused exit from the EU and US President Donald Trump’s assertion that China was impeding North Korean progress on denuclearisation have provided some support for gold," said Sharma. Trump suggested on Monday that China might be looking to derail US efforts aimed at denuclearising North Korea.

Meanwhile, hedge funds and money managers raised their net long position in Comex gold by 105 contracts to 4,291 contracts in the week to July 3, according to US Commodity Futures Trading Commission (CFTC) data on Monday.

Holdings of SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund (ETF), dropped 0.18% to 800.77 tonnes on Monday, its lowest since August 2017. "For gold to recover, we need to see the return of investors, not only speculative but ETF investors," Commerzbank’s Fritsch said. "We may have to wait until the autumn until we see a longer lasting increase in gold prices."

In other precious metals, silver fell 0.5% to $16 an ounce. Platinum slipped 0.7% to $840.70 an ounce and palladium shed 1.3% to $947.94 an ounce.